ECONOMY

Fears for manufacturing as purchasing managers index drops to lowest level ever

Greece’s purchasing managers index (PMI) last month recorded its first drop below 50.0 since data collection began in May 1999, signaling weakening conditions in manufacturing in the coming months. The PMI is a leading indicator of future trends in the industrial sector, suggesting vulnerability, said Paul Mylonas, director of economic research at National Bank. So far, industrial output has been the weakest part of Greece’s economy. However, it has been performing better than its counterpart in the eurozone and the US. The economy is slowing but still likely to outperform the eurozone, he said. NTC Research and the Hellenic Purchasing Institute said on Monday Greece’s PMI, based on a survey of about 300 purchasing managers, fell to 49.8 in August from 51.1 in July, indicating manufacturing contraction during the month. Even after taking into account seasonal factors for the month, the Greek PMI bucked the overall eurozone trend and dropped below 50.0. Any figure below 50 signals economic contraction. By contrast, the Reuters August PMI for the eurozone rose to 47.6 from 47.3 in July, indicating the rate of contraction in overall eurozone manufacturing moderated slightly. The writing is on the wall, economic activity is slowing down considerably this year, said economist Miranda Xafa at Schroder Salomon Smith Barney. I don’t see a quick PMI rebound from here but rather stability around current levels. Greece’s PMI fell as a result of cuts in corporate purchasing with businesses reporting a slowdown in demand. NTC Research said businesses sought to reduce inventories to contain costs, fearing a drop in consumer demand. I wouldn’t read too much into this (PMI), said Michael Masourakis, head of economic research at Alpha Bank. Prospects for GDP growth this year, officially seen at 4.6 percent, are still good. NTC Research said growth in new orders was flat in August, even accounting for the seasonal impact of the summer holiday period. It said the reported cuts in purchasing had an impact on business inventories, which were reduced faster during the month. Businesses used existing inventories instead of new orders to sustain production. From 2002 the government would nominate consumers which, at certain periods, would have the right to agree to prices and quantities of electricity supply directly with the producers, Kovachev said. The energy reform was further delayed by a general election in June, in which former King Simeon Saxe-Coburg swept to power.